Oracle turns in a mixed bag in 2nd-quarter results

Second-quarter earnings were strong, revenue was light, and the hardware business continued to struggle overall. But Larry Ellison calls the Sun purchase the "most strategic" deal the company has made.

Oracle reported second-quarter earnings of $2.6 billion, or 53 cents a share, on revenue of $9.1 billion, up 3 percent from a year ago. Non-GAAP earnings were 64 cents a share.

Wall Street was expecting Oracle to report second-quarter earnings of 61 cents a share on revenue of $9.02 billion.

New license and cloud revenue was up 17 percent in the second quarter from a year ago. License and support revenue was up 7 percent from a year ago. But hardware systems products saw a revenue plunge of 23 percent.

Oracle added that a strong U.S. dollar clipped second-quarter earnings by a penny a share.

In a statement, Safra Catz, co-president and CFO of Oracle, said that operating margins on a non-GAAP basis were 47 percent due to engineered systems and software sales.

On the hardware front, Oracle's business on the top line continued to struggle. Nevertheless, CEO Larry Ellison defended the acquisition of Sun. He said:

Sun has proven to be one of the most strategic and profitable acquisitions we have ever made. Sun technology enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business. I believe that products like Exadata and the SPARC SuperCluster will not only continue to drive improved profitability in our hardware business, by the end of this fiscal year, they will also drive growth in our hardware business.

The challenge for Oracle is to find the bottom in its hardware business and grow revenue in future quarters.